Payroll Fraud in Employee–Employer Disputes

Wage receivables are among the most common sources of disputes in employee–employer relations. In particular, different practices by employers may arise regarding overtime, weekly rest day, and public holiday wages. One of the prominent issues at this point is payroll fraud.

What Is Payroll Fraud?

Payroll fraud is defined as the employer showing the employee’s basic wage under different headings in the payroll. In most cases, the employer pays the employee only the net salary; however, part of this payment is reflected in the payroll as “overtime,” “weekly rest day,” or “public holiday pay.”

This method creates the impression that the employee has received overtime pay, while in reality no additional payment has been made. In other words, the employee’s entitled overtime wages have not been paid; only the salary components have been shifted.

The Court of Cassation’s Approach to Payroll Fraud

The 9th Civil Chamber of the Court of Cassation has issued numerous rulings regarding allegations of payroll fraud.

• Court of Cassation 9th Civil Chamber, 2017/11110 E. – 2019/13720 K.:

  “… In cases where the accruals for overtime, weekly rest day, and public holiday wages are extremely symbolic, or even though varying amounts of such accruals are made, the total wage paid remains unchanged, it is accepted that a portion of the wage is shown as overtime, etc. … In such circumstances, it is erroneous to rely on fraudulent payrolls.”

• Court of Cassation 9th Civil Chamber, 2015/21075 E. – 2018/14840 K.:

  “… According to our Chamber’s established practice, when a portion of the wage is shown in the payroll as overtime receivable (payroll fraud), if the amounts shown on the payroll are fixed or if the amount of wage is disputed, the employee’s claims of overtime and weekly rest day work supported by witness statements must be calculated and awarded… ”

As can be understood from these precedents, the employer’s symbolic indication of overtime or holiday pay in payrolls is considered evidence of bad faith and cannot be included in overtime calculations.

Consequences for the Employee

Payroll fraud leads to serious losses of rights for employees:

• Overtime and holiday wages are not actually paid.

• Payrolls do not reflect the employee’s real working conditions.

• When the employee files a lawsuit, the payroll signature becomes a matter of debate in terms of burden of proof.

For this reason, it is important for employees to carefully review their payrolls and especially to identify payrolls that they have not signed.

Consequences for the Employer

Employers who resort to payroll fraud assume significant risks during litigation:

• Courts do not take into account symbolic overtime accruals shown in payrolls.

• Once the employer’s bad faith is established, rulings against them are highly likely.

• Furthermore, the employer may also be held liable for court costs and attorney fees.

Conclusion

Payroll fraud is a common problem in employee–employer disputes. The employer’s act of showing the employee’s basic salary as overtime not only deprives the employee of their rights but also results in adverse consequences for the employer during litigation. Court of Cassation rulings clearly demonstrate that overtime payments shown as fixed or symbolic in payrolls cannot be accepted as genuine payments.

Employees must pay attention to payroll fraud when seeking their rights and should obtain legal advice from an expert attorney on the matter.